The presidential election is a fairly muted, low-key affair in India, largely owing to the fact that the President is little more than a ceremonial figure. However, in a charged political atmosphere even something ceremonial like a presidential election can turn out to be a slug fest- a term which best describes the drama that unfolded after the death of president Dr. Zakir Hussain in 1969.

Few could have imagined it then, but the events of 1969 would have a profound impact on the political landscape of India for several decades to follow. In this article, we shall recount the drama that precipitated the crisis.

Prelude: An Uneasy Truce

As we saw earlier, the electoral debacle of 1967 led to a truce between Indira Gandhi and Morarji Desai, brokered by the syndicate. If the parties backed off before push came to shove, it was purely owing to the fact that it was a question of survival.

It wasn’t long before the differences started showing. Morarji Desai’s cohorts stepped up the frequency of their attacks on the prime minister. The syndicate- firmly on Morarji’s side after the currency devaluation– made no secret about its desire to get rid of her. Wise enough to sense that the tide was in her favour, if not the time, Indira Gandhi opted to wait for the right opportunity before striking.

Both sides were out to destroy the other. It only remained to be seen who would fire the first shot.

First Strike

President Zakir Hussain died in office on 3rd May 1969, less than two years after Prime Minister Indira Gandhi had prevailed over the syndicate to have him elevated. Dr. Zakir Hussian’s untimely death gave the party bosses a fresh opening, one they were bound to exploit.

Kamaraj made a proposal to Indira Gandhi to nominate her for the presidential race. As anyone familiar with Indian politics would know, elevation to the presidency is but a polite way of pensioning off. Naturally, Mrs. Gandhi politely turned down the proposal. And so the Congress Parliamentary Board was scheduled to meet on Friday, 11th July to discuss the vexed issue.

Behind the scenes, the Syndicate decided that Neelam Sanjiva Reddy, then Lok Sabha Speaker and fellow syndicate member would be the party’s presidential candidate. Given the stranglehold they had on the party organisation, the election of the Syndicate’s chosen candidate would be a formality. The die, it would seem, was cast.

But the drama had only just begun.

Neelam Sanjiva Reddy (1913-1996)

Counter-Strike

Indira Gandhi, who had already come a long way since her tentative beginning in 1966 circulated a note on “stray thoughts” to the Congress Working Committee, outlining her vision. The note proposed, among other things, bank nationalisation, land reforms and curbs on industrial monopolies. In short, Mrs. Gandhi was proposing a further leftward shift.

The ploy successfully drove a wedge, since there was little ideological unanimity within the Syndicate. However, Home Minister Y.B. Chavan successfully brokered a truce, securing a unanimous resolution calling on the central and state governments to implement the Prime Minister’s proposals.

With a keen eye on the forthcoming national elections in 1972, Indira Gandhi had secured the necessary support for implementing her economic vision. However, the presidential question remained unresolved.

The Plot Thickens

The logical choice for president was acting president V.V. Giri who, having been the Vice President, was first in line. He was Prime Minister Indira Gandhi’s first choice too. However, with the party bosses plonking for Reddy, she attempted to get around the situation by proposing the candidature of Food & Agriculture Minister Jagjivan Ram, supported in this quest by senior Congressman Fakhruddin Ali Ahmed. In the event, she was outvoted.

V V Giri (1894-1980)

A fresh twist occured at this stage, as V.V. Giri- who was understandably furious at being overlooked for a position over which he had the most legitimate claim- resigned as acting president and filed his nomination in the capacity of an independent candidate. He instantly won support from most opposition parties.

Indira Strikes Again

V.V. Giri’s revolt presented Indira Gandhi with a God sent opportunity. However, she needed to consolidate her own position within the party before she could throw in her lot with Giri. Having already won support for her economic vision, she decided to proceed with the nationalisation of banks. Fortunately for her, Morarji Desai- Deputy Prime Minister and Minister of Finance- unwittingly played into her hands by opposing the proposals.

Sensing the opportunity to kill two birds with one arrow, Mrs. Gandhi announced the decision to nationalise 14 banks on 29th July 1969. Immediately thereafter, she relieved Desai of the finance portfolio and took charge herself, ostensibly for the purpose of gaining experience of running that ministry.

That effectively left the veteran Desai as Deputy Prime Minister without a portfolio. Gandhi told him that he could continue with a different portfolio. Predictably, Desai conveyed his inability to do so- which is precisely what the Prime Minister wanted anyway. For good effect, Gandhi described the decision as

…the beginning of a bitter struggle between the common man and vested interests in the country

Since the banking sector was dominated by a handful of business families, Mrs. Gandhi had effectively portrayed herself as a crusader in the struggle against vested interests, setting the theme for the next national elections due in 1972.

Another card up the sleeve

With the Syndicate divided over the issue of nationalisation of banks, Indira Gandhi played yet another masterstroke when it came to the presidential vote.

The Congress held over 52% of the total votes in the electoral college that was to elect the President. It effectively meant that the party’s candidate was an assured winner. It was being whispered that the candidate, Sanjiva Reddy, would use his powers- once elected- against the Prime Minister. His election was a mere formality now, or so it seemed to him and fellow syndicate members.

Fakhruddin Ali Ahmed (1905-1977)

To ensure that no stone was left unturned, party president and Syndicate member Nijalingappa issued a whip instructing all Congress members of parliament to vote for Reddy. Indira Gandhi, true to nature, kept all cards close to her chest until the eleventh hour. On the night of 15th August, with the presidential vote just hours away, she called upon party members to vote according to their conscience.

In effect, she had called upon the party to choose between her and the syndicate. Both sides now waited with bated breath.

The Presidential Vote

On Saturday, 16th August 1969, the electoral college went to vote to choose which of the 15 candidates would become the fourth President of India. With the Congress vote split, neither Reddy nor Giri achieved the necessary numbers and the third major candidate C.D. Deshmukh (the opposition’s nominee) emerged a distant third.

Consequently, by virtue of the provisions of Presidential and Vice-Presidential Election Rules, 1952 the deadlock had to be broken by taking into account the second preference given in the Deshmukh Ballots (electors have to indicate their preference by marking candidates in numerical order of preference). A review of the Deshmukh ballots gave independent candidate V.V. Giri a narrow win.

Mrs. Gandhi had won the battle. The war was not yet over.

Jagjivan Ram (1908-1986)

Aftermath

V.V. Giri served as fourth president of India, earning the image of “Rubber Stamp” president due to his unquestioning support to Prime Minister Indira Gandhi. Honoured with “Bharat Ratna” after his retirement, he passed away in 1980.

The person who supported Indira Gandhi in her ‘presidential’ struggle against the Syndicate- Fakhruddin Ali Ahmed- would succeed V.V. Giri to the presidency in 1974. He is best remembered today for declaring the emergency at Mrs. Gandhi’s behest. He passed away in office in 1977…

…when he was succeeded by Neelam Sanjiva Reddy, who finally achieved the distinction of being elected the President under the Prime Ministership (ironically) of Morarji Desai

Indira Gandhi’s open declaration of war precipiated an intra-party crisis, resulting in a split in December 1969 which would leave the party completely under the control of Indira Gandhi and her family

Jagjivan Ram, the Dalit leader whom Mrs. Gandhi attempted to pension off, would be instrumental in bringing down Indira Gandhi in the run up to the general election in 1977. His daughter Meira Kumar would serve as the first woman speaker of the Lok Sabha (2009-2014)

Dr. Zakir Hussian’s son in law Khurshed Alam Khan would serve as Union Minister for External Affairs, as would his grandson Salman Khurshid

It appeared a perfectly normal weekend day on Sunday, 5th June 1966. The Delhi summer was at its height and in all probability, the person who felt it more than most was Prime Minister Indira Gandhi. A momentous decision was to be announced the following day and she was doubtless aware of the fact that it was bound to have serious repercussions. Nonetheless, there was no option but to go ahead.

Unknown to her, Mrs. Gandhi was to unleash forces which would have a long lasting effect on her own self, her party as well as her country.

An Economic Crisis

1965-66 was, without doubt, India’s annus horribilis. The agricultural crisis of the 60s had reached a flashpoint with a devastating drought in 1965, soon followed by an unexpected war against Pakistan which further strained an already desperate economic situation. While the population had grown rapidly from 439 Million in 1961 to around 500 Million by 1966, the economy had sputtered along at 3.2%. Not surprisingly, inflation had reached a whopping 11% by 1965.

Indira Gandhi

Elsewhere, a balance of payments crisis had been steadily building up. Between 1950-51 and 1965-66, India’s exports had grown 20% even as imports had shot up by 131%. By 1965, India’s trade deficit had reached a perilous 930 crores at a time when foreign exchange reserves were limited. To support India in its hour of need, the World Bank’s Aid to India Consortium (AIC) had committed $1 Billion in aid for 1962 and 1963, followed by $3 Billion each year from 1964 to 1966.

By 1965, the situation had become so dire that the AIC had appointed a commission under American economist Bernard Bell to make its recommendations for salvaging the situation. The report recommended, among other things, devaluation of the Indian currency.

Power of the Currency

The Indian Rupee in that era was still pegged to the Pound Sterling at a fixed rate of Rs. 13.33/ Pound. It was, as a matter of fact, the currency used in the entire Gulf region. From 1959 onwards, the Government of India had introduced the Gulf Rupee, for exclusive circulation outside India. From Beirut in West Asia to Hong Kong in the far east, the Indian Rupee was officially or unofficially a commonly accepted tender.

All of that was soon set to change.

Who Will Bell the Cat?

Economists across the world (including many in India) were widely of the opinion that the Indian Rupee was grossly overvalued, which meant that buyers of goods exported from India had to pay more than the goods were actually worth, while imports were cheap. The over-valuation made Indian exports non-competitive in the international market, while at the same time encouraging imports.

With a balance of payments crisis, the most logical solution was to devalue the currency. Unfortunately, the value of the currency was ignorantly equated with national pride (as it still is to some extent). A decision to devalue it, while economically sound, could prove politically disastrous.

Such political considerations meant little to the World Bank, which suspended all financial assistance in 1965, until the Indian currency was devalued to reflect its true worth. Prime Minister Shastri, a pragmatic man if ever there was one, decided to take the plunge towards the end of the year. To this end, he ‘eased out’ his intransigent Finance Minister T.T. Krishnamachari and replaced him with the pliable Sachindra Chaudhari. The stage was set for far reaching economic reforms.

Unfortunately, there came an unexpected development at this stage. Shastri’s untimely death in January 1966 saw the relatively inexperienced Indira Gandhi come to power. Confronted by the economic crisis, Mrs. Gandhi made a trip to Washington in April to try and find a way out. After a chastening visit to the USA and consultations with economists and policymakers in the country, she finally bowed to the inevitable.

Indira Bells the Cat

On Monday, 6th June, Indira Gandhi announced the decision to devalue the Indian Rupee to her bemused cabinet of ministers. So fearful had she been of political repercussions, that discussions on the subject had been held in strict secrecy, so much so that her ministers were taken completely off guard. Despite the element of surprise (or possibly because of it) the cabinet accepted the ultimatum with the sole exception of Manubhai Shah, then Minister for Foreign Trade.

And so at 9:30 P.M on 6th June 1966, Finance Minister Sachindra Chaudhari announced the decision to devalue the Indian Rupee by a staggering 36.5%. By virtue of the conversion rate between the Pound Sterling and the US Dollar, the value of the Indian currency plummeted from Rs. 4.76/$ to Rs. 7.50/$ overnight.

To Do or Not to Do?

The Syndicate, which was the real power behind the throne, was blissfully unaware of the developments in New Delhi. And so at this late hour, Indira Gandhi got in touch with the powerful party president K Kamaraj. Whether the non-communication was a deliberate ploy to forestall any opposition, or simply an oversight on Mrs. Gandhi’s part is anybody’s guess.

Kamaraj’s reaction proved far worse than anything the Prime Minister could have possibly foreseen. Shaken up by his hostile response, she contemplated postponing the decision. Unfortunately, she soon discovered that the matter was out of her hands, as the International Monetary Fund had already been notified by Chief Economic Adviser I.G. Patel. For the better or the worse, the die was cast.

A Storm of Protest

The Syndicate was hardly alone in its opposition to the decision. In parliament, opposition members across party lines vociferously condemned the devaluation of the Rupee. In an era when most Indians had distinct memories of the colonial era, distrust of the ‘imperialist’ west was but natural. To members of parliament (MPs), the devaluation was seen as the ultimate sellout to America. Beneath the surface, many members on the treasury benches empathised with the opposition. Kamaraj is believed to have described the situation as

…a great man’s daughter, a small man’s mistake…

Kamaraj was referring to his own mistake in making her the Prime Minister, a point on which many Congress MPs concurred with him. Nonetheless, he discouraged those who wanted Indira Gandhi to be removed. The party would have to contest elections in a few months time and without the colossal presence of Nehru, it could ill-afford a divided house.

And so Indira Gandhi lived to fight another day.

Aftermath

The Syndicate turned hostile to Indira Gandhi, who would be repeatedly embarassed by her own party MPs on the floor of the parliament in the coming months

Yet another drought in 1966 would lead to further economic hardships, including runaway inflation, much of which would be (wrongly) blamed on the devaluation

The combination of currency devaluation and import substitution brought down the trade deficit from Rs. 930 crores in 1965 to 100 crores in 1970

I.G. Patel turned down the offer to be appointed as Finance Minister twenty-five years later (when the Indian economy, coincidentally, faced a similar crisis), paving the way for Dr. Manmohan Singh to champion the economic reforms of 1991.

Legacy

The bitter opposition from Kamaraj & co prompted Indira Gandhi to destroy the Syndicate and seize complete control over the party

Mrs. Gandhi split the party in 1969. Her faction, which would be recognised by the election commission as legitimate successor to the old Congress party, enjoyed power at the centre for all but twelve years in the period between 1971 and 2014.

Feeling betrayed by the western powers and having lost much credibility as well as political capital, Indira Gandhi increasingly turned to socialist policies to preserve her position, further shackling the Indian economy in the decades that followed

The lack of appetite for follow-up reforms left the Indian economy with structural shortcomings, setting the stage for the economic crisis of 1991

The uproar following the devaluation of the currency would impel the Narasimha Rao Government in 1991 to undertake similar measures in a measured and clandestine manner

This is the final installment of the three part series on the economic reforms of 1991

A Race Against Time

As we saw in the previous articles, newly sworn-in Prime Minister PV Narasimha Rao and his cabinet were confronted by the humiliating prospect of a sovereign default. The Prime Minister and his team averted the crisis by devaluing the currency and announcing what was effectively a new trade policy.

However, the crisis had only been postponed. India’s economy was not yet out of the woods. The reforms proposed by Yashwant Sinha and his team, which should have been unveiled in March, still remained only on paper. With financial institutions like the IMF and the world bank ruling out any further aid until the reforms were enacted, time was rapidly running out for Narasimha Rao & co.

Tentative Steps

On 9th July 1991 PV Narasimha Rao informed the Congress Parliamentary Party (consisting of Congress members in Lok Sabha and Rajya Sabha) that he would soon announce comprehensive changes to the industrial policy. Rao astutely avoided getting into the details to preclude any opposition at such an early stage.

Three days later- on Friday, 12th July- an article titled ‘Industrial Licensing To Go’ appeared in Hindustan Times. The article laid out the general contours of the proposed new industrial policy. Reading the article, Jairam Ramesh, who understandably feared that he would be blamed for the leak, rushed to the Prime Minister’s Office to clarify the situation with his boss.

Jairam Ramesh

To his astonishment, Ramesh was informed (off the record), that the leak had been perpetrated by Rao himself to test the waters before a note on the New Industrial Policy was to be presented the following Monday. The moment of truth was round the corner.

The Opposition Within

On Monday, 15th July the note on the new industrial policy was presented before the cabinet, as a preliminary to the cabinet meeting on Friday, the 19th. As expected, it ran into hostile opposition from within the Congress, led by Arjun Singh and ML Fotedar. To the party’s old guard, the new industrial policy amounted to turning the back on the economic vision of Nehru and Indira Gandhi. The draft industrial policy was plain unacceptable.

Given the fact that his government did not have a clear majority and that Rao’s own position within the party was far from comfortable, that should have been the end of the matter. But the wily Rao, whom Atal Bihari Vajpayee described as his ‘Guru Ghantal’ (master of guile) still had a trick or two up his sleeve. At his behest, Commerce Minister P Chidambaram instructed his team to find at least one paragraph from the speeches of Nehru, Indira Gandhi and Rajiv Gandhi, to link the proposed reforms with the past.

On Tuesday, 23rd July the policy was presented once again, unaltered in substance, but with a lengthy preamble linking the document with the vision of past leaders. As if by miracle, the opposition completely melted away. ML Fotedar, one of the most vehement opponents of the reforms hitherto, famously told the Prime Minister

आपने तो कमाल कर दिया (you’ve done magic)

The stage was set for the drama of 24th July.

An Unremarkably Historic Moment

Until 1991, foreign investment in Indian companies was restricted to just 40%, subject to government approval (except for a handful of sectors, 100% foreign investment is permitted in today, without prior approval). Besides, the Monopolies and Restrictive Trade Practices Act (MRTP) gave the government absolute authority to curtail expansion and acquisitions. The MRTP Act was a significant contributor to the economic stagnation of the 70s and 80s.

Arjun Singh (1930-2011)

Wednesday, 24th July 1991 was to be the day on which Finance Minister Dr. Manmohan Singh would present the much anticipated union budget. The Astute Rao, knowing fully well that all attention would be on the budget, decided to slip in the new industrial policy below the radar. And so around 12:50 P.M, the Minister of State for Industry PJ Kurien (true to style, Rao- who held the industries portfolio- opted to remain in the background) got up and said

Sir, I beg to lay on the table a statement on industrial policy

So unremarkable and low profile was the manner in which it was presented, that the document was passed with little resistance. In one fell swoop, the draconian industrial policies of the Indira Gandhi years had been demolished.

An Idea whose time has come

A few hours later, Finance Minister Manmohan Singh, got up from his seat in the treasury benches to deliver the now legendary budget speech. Wisely, he started the speech tipping the hat to the lately decesased Rajiv Gandhi. Next, he played up the financial crisis, stressing how double-digit inflation hurt the poorest sections the worst.

Over the course of the next few hours, Dr. Manmohan Singh demolished step by step the economic edifice built by the Congress party over four decades post-independence. Import licensing was scrapped, the peak import tariff rate was slashed, subsidies were drastically reduced. Mutual funds (hitherto a public sector monopoly) were thrown open to the private sector.

Not many realised it then, but in the short space of a few hours, the most decisive steps had been enacted to bring India out of the protectionist era. The Indian economy, shackled by a plethora of draconian laws for several decades, was brought kicking and screaming into a brave new world. The Finance Minister best summed it up paraphrasing Victor Hugo

No power on earth can stop an idea whose time has come

Aftermath

The Indian economy grew at an average rate of 5.7% in the 1990s

The Congress lost several state elections in the years that followed, as well as the subsequent national election in 1996

PV Narasimha Rao would be sidelined and reduced to person non-grata by the Congress party. He passed away in 2004, a lonely and forgotten man

Dr. Manmohan Singh got the entire credit for the reforms of ’91. He went on to become the Prime Minister of India, serving two consecutive terms between 2004 and 2014, during which some of the historic reforms he unleashed would be partially reversed

P Chidambaram unveiled historic tax reforms in 1997 before going on to occupy several crucial portfolios between 2004 to 2014

ML Fotedar

Jairam Ramesh would become a senior Congress leader, serving as Minister of Environment and Forests and Minister of Rural Development between 2009 and 2014

Arjun Singh retired from active politics in 2009 before he passed away in 2011, aged 80. ML Fotedar, now retired from active politics, lives on at 84

Yashwant Sinha, the original author of the economic reforms, would go on serve as Finance Minister in the NDA government in the late 90s. Now aged 79, he lives on in retirement

Legacy

The economic reforms of 1991 is widely considered to be a watershed in Indian history. India’s GDP- $ 274.8 Billion in 1991- was estimated at over $ 2 Trillion in 2015

The Indian economy is the 7th biggest in the world in absolute terms (and third biggest by Purchasing Power Parity)

Dr. Manmohan Singh remains a widely respected figure, notwithstanding the controversies that erupted during his second term as Prime Minister

PV Narasimha Rao

PV Narasimha Rao has been largely rehabilitated in recent years, although not by the party he served all his life. He now has a memorial in New Delhi and is widely hailed as a son of the soil in the newly created state of Telangana

The economic growth unleashed by the reforms of 1991 led to rising aspirations among the people of India, paving the way for Narendra Modi’s historic victory in 2014 national elections

this is the second installment of the three part series on the reforms of 1991

An Economic Crisis

As he stood on the cusp of becoming the most accidental of Prime Ministers, veteran politician PV Narasimha Rao was confronted by perhaps the worst economic crisis since independence. India had just enough foreign exchange reserves to buy oil for two weeks. Rating agencies had already downgraded India, which was on the verge of a sovereign default. Economic reforms, pending since several months due to political instability, could no longer be delayed.

Narasimha Rao knew that he needed above all a capable finance minister, ideally a non-political one, who would not be constrained by ideology. He plumped for Indraprasad Gordhanbhai Patel or IG Patel, as he was commonly known. The former governor of the Reserve Bank of India (RBI) and lately director of the London School of Economics, Patel was the ideal man for the job. Unfortunately for Rao, the self-effacing Patel politely declined the offer.

With Patel out of the race, the second choice Prime Minister turned to his second choice finance minister- another former RBI governor, who had been the advisor on economic affairs to two former Prime Ministers and was serving out the rest of his distinguished career as chairman of the University Grants Commission (UGC). Dr. Manmohan Singh had the dual advantage of being a non-political figure as well as being a world renowned economist. He was the perfect frontman, who could be feted or dumped, depending on how things turned out.

IG Patel (1924-2005)

Joining the Pieces

As the cabinet of ministers took the oath on 21st June 1991, Rao surprised everyone by inducting into his cabinet Dr. Manmohan Singh, a man little known outside of academic or official circles. The following day, he was named the finance minister. The first piece in the puzzle was in place.

The second piece in the puzzle was the drafting of a new industrial policy to free up the economy, which had been shackled under a plethora of draconian restrictions since the 70s. The new industrial policy had been in process since the 80s. To complete the unfinished work Rao chose Amarnath Verma, who had co-authored the draft industrial policy earlier, as his Principal secretary. Supporting Verma was a young economist called Jairam Ramesh, who was inducted as officer on special duty in the Prime Minister’s office (he would be transferred to the finance ministry later that year).

Having taken care of the technical aspects, Rao turned his attention to the political aspect of the challenge. He was shrewd enough to realise that the proposed reforms would run into opposition from within the Congress party, particularly the old guard which would be averse to a departure from the economic vision of Nehru and Indira Gandhi. To overcome that challenge, he handpicked the 45 year old P Chidambaram, a Rajiv Gandhi protégé. A brilliant lawyer, Chidambaram was the ideal troubleshooter.

The team in place, Rao embarked on a bold journey.

The PM and his Finance Minister

Declaration of Intent

On 22nd June, barely twenty-four hours after he was sworn in, Prime Minister made his first address to the nation. Acknowledging the economic crisis, he famously said

We are committed to removing the cobwebs that come in the way of rapid industrialisation

Not many took him seriously. Rajiv Gandhi, who had a much stronger mandate and was the undisputed leader of the party, had been thwarted in his attempts to usher in economic reforms in the mid 80s. There was no reason to believe that Rao, who had not even been his party’s first choice for the prime ministerial seat and was heading a government that did not have a clear majority, would be able to succeed where Rajiv Gandhi had failed. In fact, Rao was largely seen a man doing a holding job. The New York Times reported that

Mr. Rao is widely viewed as a transition leader…whose selection was intended to calm the factional divisions in the Congress Party as well as the nation.

Besides, Narasimha Rao was not known to be a particularly decisive man. In fact his indecisiveness made him the butt of several jokes at the time. The general mood at the time was best summed by the then editor of India Today Aroon Purie, who wrote (on Narasimha Rao’s newly inducted cabinet of ministers)

It was expected…that as a prime minister, Rao would opt for the safest and most familiar names. He did just that.

PV Narasimha Rao would soon make them eat their words

Hop, Skip and Jump

The Indian Rupee back then was pegged to a basket of four currencies: the Pound Sterling, the US Dollar, the Deutsche Mark and the Japanese Yen. As of 30th June 1991, the Indian Rupee traded at Rs. 21.14/ $. Pretty much every expert on the matter concurred that the currency was significantly overvalued, which made Indian exports more expensive and consequently, noncompetitive. With a crippling balance of payments crisis, devaluing the currency to reflect its correct value was the most logical thing to do.

Unfortunately, currency devaluation was (and still remains to some extent) a politically sensitive matter. Indira Gandhi had paid dearly for devaluing the currency in 1966 in the face of another economic crisis (more on that some other day), an episode that was relatively fresh in popular memory. The fallout of a devaluation could be huge, more so given the fact that the government was dependent on outside support from the communists for its survival.

S. Venkitaraman

With the humiliation of a sovereign default looming, Rao decided to take the plunge. The project, code named “Hop, Skip and Jump” was approved by the Cabinet Committee on Political Affairs, following which S. Venkitaraman, the then Governor of the Reserve Bank of India, was notified.

With a view to containing the political fallout, it was decided to devalue the currency in two steps. On Monday, 1st July 1991, the spot selling rate of the US Dollar was revised from Rs 21.14/ US$ to Rs. 23.04/ US$. The Finance Minister Dr. Manmohan Singh, who had been the main proponent of the two-stage devaluation, described it as a routine adjustment. Denying that the move was undertaken under pressure from the International Monetary Fund (IMF), he said

We will not do anything under pressure and which is not consistent with our national interest

Industry body Confederation of Engineering Industries (which changed its name to Confederation of Indian Industries- CII- in 1992) welcomed the move. The following day, Commerce Minister P Chidambaram, Rao’s troubleshooter, held a meeting with media representatives to explain the logic behind the move and prepare them for major structural reforms which were to follow shortly.

The following morning- Wednesday, 3rd July 1991- the Rupee was further devalued to Rs. 25.95/ US$. In the short space of two days, the currency had been devalued by a staggering 23%. To contain the inevitable political fallout, Dr. Manmohan Singh officially announced that there would be no further devaluation.

Prime Minister Rao, with a view to building up popular support for the move decided to tell the people of the country as it was. In a televised address on Doordarshan- the official government channel and the only television channel in India in that era- he famously said

…this is only the beginning. A further set of far reaching changes and reforms is on the way…

Follow Up

The following day, Commerce Minister P Chidambaram delivered on his promise made on the 2nd by unveiling a series of trade policy changes, virtually amounting to a completely new trade policy regime.

In the meanwhile, Finance Minister Dr. Manmohan Singh was furiously working behind the scenes to avert the looming sovereign default. In a replay of what had happened a few weeks earlier, Air India transported 25 tonnes of gold to London on 6th July, followed by 9.8 tonnes on the 13th and a further 12 tonnes on 18th July. Against the gold shipments, the Government of India obtained financial support to the tune of $ 400 million, which staved off the looming default by a few days.

By mid July, Rao and his team had successfully managed to postpone the looming crisis. However, structural reforms- the only long term solution- were still pending. Consensus for structural changes were still needed from within the party, let alone the wider public.

This is the first in a series of three articles on the reforms of 1991

On Thursday, 20th June 1991, Pamulaparti Venkata Pigalle Narasimha Rao sat down for a briefing on the state of the Indian economy. It is doubtful whether he would have imagined being there even in his wildest dreams as late as a month before. Not even a fiction writer could have scripted the chain of events that had led to the present.

There remained less than 24 hours to go before P.V. Narasimha Rao was to be sworn in as the ninth prime minister of India. Coming as it did at a time of economic difficulties, it was logical for the man who was to head the government to get first-hand knowledge about the state of the economy.

Having held multiple cabinet portfolios in the past, Rao knew better than most the extent of the rot, and yet nothing could have prepared for the shock he received as Cabinet Secretary Naresh Chandra briefed him about the current state of the economy. His reaction was

I didn’t know it was this bad

The events that unfolded over the month that followed would change the course of Indian history.

India in 1990-91
The Iraqi invasion of Kuwait in August 1990 resulted in a dramatic spike in the price of crude oil, which more than doubled from $17 per barrel in August to $36 per barrel in October. The price spike proved to be a short-term phenomenon. However, for a country like India which depended almost entirely on imports for its oil requirements, and one whose economy was already in a precarious condition, the spike was crippling.

The seeds for the disaster were sown in the 1970s, when the GDP grew at a measly 3.5%, even as the population increased nearly 25% to 683.3 Million by 1981. Attempts to stimulate growth during the 80s resulted in the GDP growing at over 5% during the decade. Unfortunately, the growth was unsustainable, fuelled as it was by government spending. By 1990 the government of India was paying Rs. 35.3 out of every Rs. 100 it was earning only to pay interest on its borrowings.

Prime Ministerial Musical Chairs
So dire was the situation, that the National Front government headed by then Prime Minister V.P. Singh borrowed $550 Million from the International Monetary Fund (IMF) in September 1990. Fearing a political backlash at a time when it was surviving on outside support, the government was forced to do so surreptitiously, without publicly disclosing it.

In the event, the cloak-and-dagger nature of the operation proved futile, as Singh’s government collapsed when ideological differences resulted in the BJP withdrawing support in November. Samajwadi Janata Party (SJP) leader Chandra Shekhar, a former Congressman himself, formed a new government with outside support from the Congress.

In the meanwhile, the balance of payments situations had deteriorated even further. In January 1991 the new government, with Yashwant Sinha as its finance minister, convinced the IMF to approve two loans- $775 Million under the first credit tranche and $1.02 Billion under the compensatory and contingency financing facility. In return, the government pledged to initiate economic reforms in the union budget to be presented in February.

V.P. Singh (1931-2008)

Chandra Shekhar’s cabinet, led by Finance Minister Yashwant Sinha drafted the proposed economic reforms, much to the discomfort of the Congress. Financial Times famously said that Rajiv Gandhi (former Prime Minister and the then leader of the Congress) was desperately trying to pull the rug under him because Chandra Shekhar was an “uncomfortably successful” prime minister.

The comments were not off the mark, as the events of 4th March would prove, when the Finance Minister was to table the budget before parliament. Yashwant Sinha found himself unable to go ahead with the plans due to Congress intransigence. Unwilling to countenance any further bullying by Congress, Chandra Shekhar resigned on 6th March.

The resultant parliamentary deadlock meant that elections to the Lok Sabha had to be held afresh. It also meant that the economic crisis, which had been brewing since September 1990, could only be resolved when the new government would come to power post-elections, which would only happen around the beginning of June, as voting was to take place in three phases starting 20th May.

Chandra Shekhar (1927-2007)

Interim Measures
S.P. Shukla, the then Finance Secretary, did a sterling job of raising finances through a series of bridge loans to keep the coffers running. But those were just interim measures, analogous to keeping a patient on an artificial respirator. Desperate to preserve precious foreign exchange, the government was forced to cancel all import orders. Worse still, foreign suppliers had stopped accepting letters of credit (LCs) issued by Indian banks unless guaranteed or confirmed by internationally reputed banks.

So dire was the financial situation, that leaders across party lines- including Rajiv Gandhi (Congress), L.K. Advani (BJP), V.P. Singh (Janata Dal) and Chandra Shekhar (Samajwadi Janata Party)- concurred that the country had no other option but to seek a loan from the IMF. The new government that would assume office in the first week of June would have its work cut out.

A Searing Tragedy
At this stage came a tragic twist of fate. On 21st May the leader of the Congress and former Prime Minister Rajiv Gandhi was assassinated at Sriperumbudur near Chennai, where he had gone to address an election rally. Under the circumstances it was impossible to continue with a business as usual approach. The two remaining phases of voting were deferred to 12th and 15th June.

Rajiv Gandhi (1944-91)

The unexpected development meant the formation of the new government, which was expected to be completed by the first week of June, would not happen until the end of the month. By now India’s foreign exchange reserves had dipped below $1 Billion. The IMF and the World Bank had both pledged their support to India, but it was evident that no further financial assistance was forthcoming until economic reforms- a precondition to the assistance given in 1990- were initiated. Without the foreign exchange to buy oil, the country would come grinding to a halt. India was on the verge of a sovereign default.

Selling the Family Silver
In October 1990, the United Front Government had realised that it held one additional card up its sleeve in the event of an emergency- confiscated gold lying in the custody of the RBI. In October 1990 the V.P. Singh government had issued an ordinance to revalue the gold at market price. Six months later, confronted by the prospect of a humiliating sovereign default, the caretaker government under Chandra Shekhar gave its approval to act.

And so during the last days of May, 20 tonnes of gold were dispatched to London in four consignments to the Bank of England, in exchange for which the IMF advanced a fresh loan of $240 Million. The operation was carried out by the State Bank of India under utmost secrecy. Only a week later, when an official announcement was made by Finance Minister Yashwant Sinha, did the country get to know about the sale of gold.

Yashwant Sinha

A Twist of Fate
In the meanwhile the Congress, still the biggest party in the political landscape and the one most likely to return to power after elections, was without a head. With too many claimants to power, the party decided to revert to the glue that held together its disunited ranks: the Gandhi family. The newly widowed Sonia Gandhi, who had not been involved in active politics until then and knew too little about her adopted country, was understandably unwilling to assume the mantle herself.

Nevertheless, Sonia Gandhi called on the 78 year old P.N. Haksar, a veteran who had once been Indira Gandhi’s principal secretary and one of her most trusted advisors. On his recommendation, Mrs. Gandhi approached Vice President Shankar Dayal Sharma, a veteran leader and one of the most respected party men. Sharma, nearly 73 years old and struggling with failing health, politely declined the offer.

With S.D. Sharma out of the reckoning, Mrs. Gandhi’s second choice was another veteran Congressman who had lately announced his retirement from politics: former Andhra Pradesh Chief Minister P.V. Narasimha Rao. Rao had taken no part in the elections and was in fact in the process of packing his belongings so that he could vacate his quarters in Lutyens’ Delhi and resettle to his house in Hyderabad.

S.D. Sharma (1918-99)

And so the 70 year old Rao, who was all set to retire into obscurity, who had not even been his party’s first choice to replace the unexpectedly deceased leader, was now confronted by the prospect of becoming the Prime Minister of India.

The offer was too good to refuse.

Victory
The assassination of Rajiv Gandhi resulted in a massive wave of sympathy in favour of the Congress. Having fared poorly in the constituencies which went to vote on 20th May, the party swept the post-assassination phase to emerge with 244 seats in the Lok Sabha- 28 short of an outright majority, but enough to form the government with outside support from the communist parties.

P.V. Narasimha Rao, who had not even contested elections, contested a bypoll in Nandyal (Andhra Pradesh), winning by a massive 5 lakh votes. On 21st June 1991, he and his cabinet were sworn in.

P.V. Narasimha Rao

The newly formed government had just enough foreign exchange reserves to pay for two weeks of imports. Confronting it were the challenges of a looming sovereign default and an economy that was in dire straits.

The proposals drafted by Yashwant Sinha and his team had to be implemented as soon as possible. There was absolutely no scope for any further delay. But the political instability of the previous 18 months meant that reforms were still a long way away, as no attempt had been made to forge a political consensus until then.

Palashi in present day West Bengal is a small town which derives its name from Polash– the Bengali name for the red flower, popularly known as flame of the forest- which once abounded in that region. Anglicised as Plassey, that obscure little town was the scene of a seemingly insignificant battle, but one whose outcome changed the course of India’s history. The effects of that battle are felt to this day.

This is the story of how it happened.

Bengal in 1757

The re-conquest of Calcutta in February 1757 followed by the humiliating treaty that the British imposed on Siraj ud Daula, the nawab of Bengal, greatly diminished the prestige of the already unpopular nawab while proportionately increasing the fear and awe in which the British were held.

Lieutenant Colonel Robert Clive, member of the governing council at Calcutta, followed up the victory against the nawab’s army by raiding the French settlement in Chandan Nagar and, in effect, rendering the French incapable of ever challenging British arms in India.

An Uneasy Peace

Mir Jafar- grand uncle of Siraj ud Daula and one of the most influential people in the kingdom- had ample reason to dislike the nawab, as we have seen earlier. Siraj, with his increasingly fickle behaviour after the humiliation at the hands of the British in February 1757 left courtiers- especially Mir Jafar- even more fearful of his caprices.

The British, who already had designs on the nawab, sought to exploit the prevailing atmosphere of fear and suspicion. On the instructions of Clive, William Watts- the British waqeel (representative) at the nawab’s court- started cultivating a friendly relationship with Mir Jafar.

The British were hardly alone in the game of conspiracies. Siraj, who had blown hot and blown cold after the humiliation of February, had taken umbrage when Clive had dispatched a detachment of troops to pursue French soldiers and officials, who had escaped during the siege of Chandan Nagar and taken refuge in Bihar. He angrily served an ultimatum to Watts on 20th April instructing the British not to disturb the French any further or else end all diplomatic relations and recall their waqeel to Calcutta.

The British did neither, much to the chagrin of Siraj. The desire to get rid of the other was intense and mutual. It was just a matter of time before things would come to a head.

Conspiracy in the Air

On 23rd April 1757, the British received a proposal from an officer named Yar Lutf Khan to overthrew the nawab with his support and name him as the new nawab. In exchange he offered to enter into any engagements which the English should stipulate for the advantage of their affairs. He was almost certainly acting on behalf of the Seths, a family of prosperous traders whose backing had propelled Alivardi Khan- the previous nawab- to the throne.

The Seths had been sidelined by Siraj, losing the position of influence they had enjoyed under his grandfather. If that was not bad enough, Siraj’s increasingly capricious and insecure behaviour gave them every reason to fear that he could at any time turn against anyone who could possibly hurt him. To make things worse, they had sustained a massive loss when the French- to whom they had lent large sums of money- had been driven out by the British. Siraj had done nothing to help them recover their losses.

The British, consequent to the ultimatum served on them by Siraj, were already contemplating overthrowing him. They now had the backing of the Seths who, strangely enough, had not definitely named the would-be successor to Siraj. The very next day came a communication from Khwaja Petrus, an Armenian merchant close to the nawab. This one came from a much higher source.

The Battle of Plassey

Mir Jafar, who had every reason to hate and fear Siraj, had sent a proposal through Petrus to dethrone the nawab. Not only did he offer wholehearted support, but he also named several high ranking officials who were part of the conspiracy. He called upon the company to suggest their terms. For good measure, he also advised soothing the nawab’s fraying nerves with every appearance of peace until the preparations were complete.

The British were already weighing similar offers from other quarters. The sheer seniority of Mir Jafar left little doubt as to who would be their most valuable ally. They lost little time in proposing their terms, which included:

Mir Jafar to confirm all the grants and privileges allowed by Siraj ud Daula to the company

Mir Jafar to enter into an offensive and defensive alliance with the British.

All Frenchmen in Bengal with their Factories and goods to be delivered up to the British. The French never to be permitted to resettle in the three Provinces (Bengal, Bihar and Orrisa).

East India Company to receive 100 lakhs tor the loss sustained by the destruction of Calcutta and for the expenses of the war.

The Company to receive the zamindari of the country south of Calcutta between the River and the Salt Lakes as far as Culpee.

Mir Jafar did not give an immediate reply as he had to first consult Rai Durlabh, the nawab’s treasurer who commanded most of the army. A conspiracy to overthrow the nawab would be futile without the support of the treasurer. On 4th June 1757, William Watts was informed that Rai Durlabh and Mir Jafar had agreed to the terms of the committee.

Deadly Games

The plan now firmly in place, William Watson started planning his escape from the clutches of Siraj. On 12th June he and two companions, under the pretext of going out to the countryside on a hunt, made their escape and joined Clive and his forces, who were camped at Khulna (in present day Bangladesh).

Plassey War Memorial

In the meanwhile, Siraj ud Daula, who had received information of the brewing conspiracy from the French, sprung into action. Knowing how badly he needed the support of his senior officers, he personally called on Mir Jafar and sought reconciliation. Jafar, who had no reason to trust the young man, promised to be true to the nawab, even as he was sharpening the knives.

Siraj, satisfied that he had the support of his grand uncle, now set out to carry out his long held desire to get rid of the British. He joined his troops who were camped in a place called Palasi (Anglicised as Plassey). On 23rd June, the two armies came face to face- the nawab’s army far outnumbering the forces of the East India Company. On paper it should have been a no-contest.

Unknown to him, the nawab was in for a nasty surprise.

The Battle of Plassey
On the morning of 23rd June, Siraj ud Daula took his head at the vanguard of a 15,000 strong force. Supporting the vanguard were the forces of Mir Jafar, Rai Durlabh and Yar Lutf Khan, all three of whom were in the conspiracy. Not a shot would be fired by their troops.

Another factor which favoured the British was the fact that they were protected from cannon fire by the Laksha Bag– a grove of 100,000 trees which they had occupied. The only effective alternative was hand to hand combat which, given the forested terrain, would have entailed severe casualties. Whether it was to avoid unnecessary casualties or due to the uncertain morale of his troops, Siraj desisted from ordering an all-out assault on the British.

An indecisive cannonade lasted several hours until a heavy shower in the afternoon damaged the gunpowder, resulting in a slackening of fire from the nawab’s side. Sensing an opening, Major Killpatrick unilaterally launched an assault- sending word to Robert Clive, who was temporarily away from action to get some much needed rest, having given instructions not to go on the offensive until night time. Clive was at first dismayed when he received the intimation. His first instinct was to instruct Killpatrick to retake position. However, soon realising that it was impossible to do so, he reversed his orders.

By then morale in the nawab’s camp was at rock bottom. No one quite knew who was fighting and who was not. Worse still, Siraj’s army had lost Mir Madan, one of the most senior officers. The confusion plus the damage to the gunpowder had completely sapped the morale of the nawab’s forces, who fell apart amidst scenes of utter chaos.

Realising that the war was lost, Siraj ud Daula hastily retreated from the battle field. Clive and Killpatrick had won the day.

Aftermath

Siraj ud Daula headed off to Bhagwangola (in present day Murshidabad district of West Bengal) in disguise. By a cruel twist of fate, he was recognised by an enemy who happened to be present purely by coincidence, who had him arrested.

Mir Jafar was crowned the new nawab. He would be dismissed by the company in 1760, before being reinstated in July 1763. He remained in power until his death in January 1765, aged 73

An estimated £ 4.5 million was paid by Mir Jafar to the East India Company and to private individuals who had sustained losses due to the sacking of Calcutta in June 1756

Siraj ud Daula was murdered in captivity on 2nd July 1757

Legacy

The victory effectively rendered the British the masters of a vast territory, bigger than any European country

The victory at Plassey, following a similar success in the south a few years earlier, laid the foundation of the British empire in India

The defeat of the French at Chandan Nagar, followed by the final defeat at Vandivasai (Wandiwash) in 1760 ensured that the British would have no rivals for power in India

The name Mir Jafar remains, to this day, a byword for a traitor in eastern India

Sources

Robert Orme, A History of the Military Transactions of the British Nation in Indostan from the year 1745, Volume II, The Strand, London (1813)

As we saw in the previous article, Siraj Ud Daula’s raid on the British factory in June 1756 resulted in a debilitating loss for the East India Company, estimated at 95 Lakh (9.5 Million) rupees- an astronomical sum for that era. The sheer magnitude of the loss goes to show the value of the Company’s possessions in Bengal. It goes without saying, that the East India Company was going to do everything within its powers to regain Calcutta.

The single biggest source of support for the company came in the form of Siraj himself, who was lulled into complacency after the astonishing ease with which he had managed to sack the factory at Calcutta. From fear, his outlook towards the Europeans had changed to one of dismissiveness. In the words of a contemporary

A pair of slippers, said he, is all that is needed to govern them

His delusions would soon be shattered.

The Return of Robert Clive

The Council at Fort St. George in Madras resolved to act. However, the expedition was deferred to the end of September, by which time monsoon would be well behind and there would be greater clarity regarding their position vis-a-vis the French, who still remained a force to reckon with in the south.

One of the leading figures in the Council was Robert Clive, the hero of Arcot in 1751- as we have seen earlier. It owed purely to destiny that Clive now found himself in India. Having returned to England in 1754, he was elected to parliament and served in that capacity for a year, before he was unseated on the petition of his defeated opponent, a certain Richard Hussey. Frustrated at the reversal of fortunes, Clive applied for permission to return to India. The company board willingly obliged, obtaining for him the commission of Lieutenant Colonel in the Royal army and naming him Governor and Commander of Fort St. David (near Cuddalore), with succession to the Governorship of Madras.

And so Clive and fellow Council members at Madras lay in wait, as the month of September approached.

Robert Clive

Recapture of Calcutta

After much deliberation, it was finally decided on 21st September, that the land forces would be led by Clive. By now the general consensus was that the objective of the expedition was not restricted to mere retaking of British possessions in Calcutta, amply evidenced by the contents of a letter dated 13th October 1756 from the Council of Fort St. George addressed to their counterparts in Bengal. Among other things the letter spoke about

…the great advantage which we think it will be…to effect a junction with any powers in…Bengal that may be dissatisfied with the…Nabob’s government…

Clearly, the Council was looking beyond mere repossession of Calcutta or compensation for the losses suffered. As in the south, the company was looking to get involved in local politics, if only to secure its trade.

The first blow was dealt by the resourceful Clive, who captured Calcutta after facing little resistance, following which the company left no doubt as to its intentions. The council drew up what was effectively a declaration of war against the nawab.

Double Games

The nawab Siraj ud Daula, was unable to react immediately, based as he was in Murshidabad. Nevertheless, there wasn’t the least doubt that there would be reprisals from his end. To prepare for the inevitable, the British started fortifications. Possibly to play for time, Clive wrote a letter to the nawab proposing peace.

Siraj, no slouch himself, was already on the March towards Calcutta with his troops when he received the communication from Clive. He answered positively, but continued the March towards Calcutta, keeping all options open. On 2nd February he set up his base within sight of the British fortifications.

And so both parties lay in wait, keeping up the pretense of civility, even as they prepared for battle.

A Daring Raid

The British received a letter from the nawab on 2nd February, desiring them to send their emissaries to Nawabgunj, a small village ten kilometres to the north of the camp (now a small town 25 kilometres north of present day Kolkata). The British complied two days later, sending two representatives. The hostile conduct of Siraj and his courtiers left the emissaries Walsh and Scrafton apprehensive of their safety. The two escaped under the cover of darkness to their camp. Their report left no doubt in Clive’s mind as to the next course of action.

The following morning (5th February 1757), Clive led an attack on the nawab’s camp. Around 3 A.M the British soldiers, under the cover of a dense fog, typical in Eastern India during winter months, made their way towards the camp. When the fog lifted momentarily at 6 o ‘clock, the British found the enemy’s cavalry massed along their flank. The sheer proximity took both sides off-guard.

Fortunately for the British, the fog descended again. With considerable presence of mind, Clive kept his men together despite the fact with with near zero visibility, they had little idea of their exact location. When the fog finally lifted around 8 A.M, the British troops found themselves right in the middle of the enemy camp.

With no possibility of retreat, Clive decided that the only way out was to make a bold stand. Fortunately for the British, Siraj panicked at the sight of the foreign troops and hastily retreated. In the confusion that followed, Clive’s troops benefited immensely from his cohesive leadership against a vastly superior, but rudderless enemy, ending up with just 194 men killed or injured, as against 1,300 of the nawab’s forces.

Siraj ud Daula

Siraj Sues for Peace

As we have seen earlier, Siraj ud Daula was never a popular figure in the power circles of his state. During the course of his march to Calcutta, Siraj had found many soldiers and even some senior officers less than willing to follow him into action. Now, after the unexpected debacle and the hasty retreat, any remaining enthusiasm for a military adventure had been dispelled.

Seeing no other way out, Siraj sued for peace. For safety’s sake, he had already decamped towards the salt lakes further east. Despite pressure from some quarters to pursue and attack the nawab, Clive stood firm. The Council of War supported Clive’s stance. On 9th February, Siraj ud Daula signed a peace treaty, the main terms of which were:

All privileges granted by the Emperor of Delhi to the British to be confirmed.

All goods under the British dastak to pass free throughout the nawab’s territories (which included Bengal, Bihar, and Orissa).

The Company’s Factories and all goods and effects belonging to the Company, its servants or tenants, which had been taken by the Nawab to be restored

A sum of money to be paid for what had been plundered or pillaged by the Nawab’s people.

Calcutta to be fortified as the British thought proper.

The British to have the right to mint coins

Siraj had agreed to a humiliating treaty, but it needed no genius to say that he would take the first available opportunity to wreak vengeance. There were many on the British side too, who pressed for further action even before the ink on which the treaty was written had dried.

Clearly, the treaty was not the end of the war, but merely the calm before the storm.

Aftermath

The British sacked the French settlement at Chandernagar in March 1757

The sacking of Chandernagar triggered off a conspiracy to overthrow Siraj (more on that in the next article)

The sides would renew hostilities in June 1757, at a place called Palashi

Sources

Robert Orme, A History of the Military Transactions of the British Nation in Indostan from the year 1745, Volume II, The Strand, London (1813)

In the previous article we saw how events in the south led to the East India Company getting involved in Indian politics for the first time. In this article, we shall see how the Company got involved in political machinations in Bengal, leading to the historic battle at Plassey.

Bengal in the 1750s

As was the case with regional rulers across the country in 18th century India, the nawab of Bengal enjoyed absolute authority albeit under the nominal vassalage of the Mughal sultan in Delhi. In keeping with the general atmosphere of lawlessness owing to weak central authority, there were several palace intrigues with multiple claimants to the various thrones across the country.

As the 18th century reached the midway mark, the nawab of Bengal was a man called Alivardi Khan, a man of humble origins who had made his way to the throne with a combination of intrigue and bribery. It says something about the prevailing atmosphere in that era that the generalissimo- Alivardi Khan’s brother in law Mir Jafar Khan Bahadur- was himself not the most reliable of allies.

The anointed successor to Alivardi Khan was his grandson Mirza Mohammed, whom Alivardi Khan was fond of to a fault. Mirza ascended to the throne after the passing away of Alivardi Khan on 10th April 1756, at the young age of 23, assuming the imperial name of Siraj Ud Daula. Given the general atmosphere of intrigue in that age, where allies were not just useful but even indispensable for any ruler, it is hard to imagine a bigger misfit in the role of a ruler than Siraj. According to one contemporary source he

(made) no distinction between vice and virtue, and paying no regard to the nearest relations, he carried defilement wherever he went and… he made the houses of men and women of distinction the scenes of profligacy… he became detested… and people meeting him by chance used to say “God save us from him”

To add to his profligate, philandering ways, Siraj was also a man with a formidable temper given to using violent language- unbecoming of a man seated on the throne. Consequently, even people of high rank lived in constant fear of humiliation, possibly far worse consequences, depending on the caprices of the new nawab. The only exception was Mir Jafar, grand uncle of Siraj who was too senior to be cowed down by a 23 year old.

For his independence, Mir Jafar was relieved of his post soon after the ascension of Siraj. The new nawab stopped short of dismissing him altogether, allowing his grand uncle to retain the prestigious position of the paymaster to the army. Perhaps it was due to the fact that Mir Jafar’s support had been crucial in securing the ascension to the throne. The presence of an unreliable ally- one who now had reason to hate him too- in an important position was bound to end badly for Siraj.

Europeans in Bengal

There were three major European settlements in Bengal at the time- the British East India Company in Calcutta, the French company in Chandan Nagar (known at the time as Chandernagore) and the Dutch company in Chinsurah- all three of which enjoyed a flourishing trade.

All three companies had fortified their possessions with the consent of the earlier Nawab Alivardi Khan, who ensured that the fortifications did not go far enough for any of the companies to pose a threat to his own rule- a prudent policy, given what had just happened in the south. His attitude towards the Europeans is best summed by a contemporary

He used to compare the Europeans to a hive of bees, of whose honey you may reap the benefit, but… if you disturbed their hive they would sting you to death

The relationship between the nawab and the East India Company was subject to considerable friction at the best of times. Company officials complained that they were subject to frequent extortions by the nawab, who was denying them full enjoyment of the royal firman issued in 1717 by the Mughal emperor to whom the nawab owed suzerainty (its a different matter that the emperor’s writ had little force outside of Delhi by then). On his part the nawab maintained that the British were only entitled to privileges that were in the interests of the province and that they were abusing their privileges to the detriment of the government and the native traders.

What was actually transpiring is anybody’s guess- the two viewpoints are by no means contradictory. But what is beyond doubt is that both parties had reason to complain about the conduct of the other. The unpopularity of the new nawab further compounded things, as foreign merchants no did not feel anything approaching the fear that his grandfather evoked.

Matters were bound to come to a head.

A ‘Taxing’ Affair

Raja Ballabh, peshkar to the lately deceased diwan (the man responsible for tax collections), was called to render an account of his late boss’ transactions, to ascertain how far his estate was indebted to the nawab for the revenues of Dacca. Raja Ballabh was unable to give a satisfactory account, owing to which he was placed under strict surveillance virtually amounting to imprisonment.

Alivardi Khan

At that stage Raja Ballabh sent his son Krishna Das with his family to Calcutta, with a letter recommending their admission to the British settlement. Why he did so is a matter of some debate. Some historians contend that Raja Ballabh did it to protect his family. The other possibility is that it was part of a conspiracy hatched in partnership with Siraj, to create a pretext for raiding the British settlement (there is circumstantial evidence supporting the later point of view). Given what had happened in south not so long ago, Siraj had either ample reason to suspect the British of skulduggery or wanted a pretext to raid their settlement depending on your viewpoint.

Trouble in Europe, Ripples in Bengal

Around the same time, the British and French were anticipating a fresh outbreak of hostilities in Europe (the seven years war would recommence a few months later). And so as the year 1756 arrived, the respective companies started fortifying their possessions, making no pretence of doing so, much to the consternation of the insecure Siraj, who sent messengers calling on both sides to demolish the newly laid fortifications.

The French tactfully handled the messenger, persuading Siraj that he had nothing to fear from them. The British failed to do likewise. No known copies of the reply from Roger Drake, the British governor at Calcutta, survive today. However, what is known beyond doubt is that Siraj’s reaction was hostile. Whether his rage was spontaneous or pre-planned is anybody’s guess, but what followed was utterly predictable. The nawab’s forces raided and shut down the British factory at Kasim Bazar (or Cossimbazar) and turned towards Calcutta.

The Nawab’s forces surrounded the British possession on 20th June. With hardly any troops at his disposal, Governor Drake hastily evacuated the fort, leaving the survivors to their own devices.

Siraj Ud Daula

The Black Hole

The nawab’s soldiers plundered the British settlement, but no bodily harm was done to any of the people living there, nor was there ill treatment of any kind. It looked like the siege would pass of relatively calmly until a group of drunk British soldiers assaulted some of the Nawab’s soldiers.

The assaulted soldiers, who were evidently under orders to restrain themselves, complained to the nawab. The enraged Siraj asked ordered the offending troops to be confined in the black hole- a dark, dingy room without ventilation, which was used for confinement of errant soldiers. The overzealous soldiers unwisely confined all the prisoners (numbering, it is said, over 100), irrespective of their background- in a cell meant for a handful of people.

The combination of the incredibly congested room and the fact that it was the hottest period of the year, was bound to be lethal. Unfortunately, none of the prisoners could be released without the consent of the nawab and given his temper, no one dared disturb Siraj in his sleep. The confinement lasted overnight.

When the confined prisoners were finally released on the morning of 21st June 1756, only a handful of them were still alive. In the words of a survivor

…when only twenty-three of one hundred and forty-six who went in came out alive, the ghastlyest forms…were ever seen alive, from this infernal scene of horror.

If plunder was the chief motivation behind the sack of Calcutta- as some historians have insinuated- Siraj must have been disappointed to recover a relatively paltry fifty thousand rupees and not the lakhs of rupees he might have expected. Nevertheless, he had successfully asserted his authority over the upstart British.

As we saw in the previous article, a dispute over succession to the throne of the Nizam of Hyderabad led to a fresh round of hostilities between the British and French companies. The French supported Chanda Sahib, claimant to the throne of the nawab and the British sided with Mohammed Ali, son of the late nawab.

Chanda Sahib and his French allies held the upper hand as they laid seige to the British garrison at Tiruchirapalli. Confronted by a vastly superior opponent, it was proposed to stage a diversionary attack on Arcot, the capital of the nawab of Carnatic, under the leadership of Robert Clive, a 25 year old writer with the East India Company who had just taken up a military posting.

The Siege of Arcot
The plan was communicated to the company governor at Madras, Saunders, who immediately gave his approval and instructed Clive to return to Madras and take charge of the army that would attack Arcot. On 26th August 1751, Robert Clive set off from Madras at the head of 200 European and 500 Indian sepoys. Despite the sheer exhaustion of the trying journey, the troops found Arcot so poorly defended, that the fort was besieged and the town surrendered without a single casualty. The surprise had been complete.

Robert Clive

But it was a case of winning only the battle. The war was far from over. Clive had less than a thousand troops to hold the town and a (numerically) far superior enemy army was camped in the vicinity. The situation was further compounded by the fact that some of the soldiers had to be sent back to Madras, since Governor Saunders had transferred some of his own troops to Clive and consequently, was left in a very precarious position. Those troops gone, Clive had only 120 British and 200 Indian sepoys at his disposal, some of whom were sick and wounded.

On the night of 23rd September, the enemy army occupied the city. Opting for offense over defense, Clive brought out his troops and guns to seize the initiative. The plan spectacularly boomeranged, as Clive had not accounted for enemy snipers, who took a significant toll on his troops. With fifteen killed and nearly as many wounded, the 300 or so company troops now faced a 10,000 strong opponent. Taking them on in the open was just not an option. Clive now opted for the most logical approach: to make a stand within the fort until reinforcements would arrive.

A Desperate Stand
Outnumbered nearly 500 to 1, Clive and his men stood steady in their fort at Tiruchirapally. Fortunately for them, they had adequate provisions at least for three months and ample water available from a reservoir, thanks to the brilliant work of a local mason who managed to block the channel from which it could be drained from outside. They were also extremely fortunate in that their opponents too were content to play a waiting game, reasoning that the British would have no choice but to eventually surrender.

And so despite attacks from enemy snipers, the constant threat of a surprise attack and mounting injuries, Clive and his troops held on tenaciously for seven extraordinary weeks, as September gave way to October and October to November. With heavy guns from French Pondicherry now battering the fort and constant sniper attacks, Clive was down a measly 200 troops. While Clive steadfastly refused to surrender, he knew that his troops were on borrowed time.

The clock was rapidly ticking away.

Extent of French Influence

The Miracle of Arcot

Elsewhere, events started taking a different turn. Krishnaraja Wadiyar II, the ruler of Mysore, wise to the threat posed by the Muzaffar- Chanda Sahib- French triumvirate to his independent kingdom, declared himself in favour of Mohammed Ali. The local chieftains who ruled the region from Arcot to the east coast followed suit, enabling the safe passage of English convoys from Madras to Arcot, allowing Fitzpatrick and his relieving troops free movement.

Around the same time came a far more crucial breakthrough. Even as his British allies held steadfast at Arcot, Mohammed Ali had opened a channel of communication with the Marathas. At length, the Maratha viceroy at Tanjavur, Murari Rao, agreed to dispatch a force of 6,000 soldiers to support the British. The news of the arriving reinforcements gave Clive and his forces a massive morale boost.

The news had an equally negative impact on Raza Sahib (son of Chanda Sahib), who was in charge at Arcot. Despite the 15,000 troops or so at his disposal, he knew that his forces would be no match for the mighty Marathas. In desperation, he served an ultimatum on Clive to surrender and be allowed to evacuate honourably or be annihilated. Having held fort for so long and now having the backing of the Marathas, Clive turned down the offer- a brave decisions, since his defence of the fort was in its last legs.

On 14th November 1751, Raza Sahib and his troops set out for the decisive offensive. Elephants charged at the gates to batter them down and attackers rushed forward to scale the walls. The defender’s fire put paid to the elephants which, in panic, trampled down several soldiers on their side to death. The first line of attackers were mowed down by constant firing on the breaches which they were trying to cross and the second line were blown to smithereens by British defenders, who hurled down grenades on them.

Mohammed Ali

As the battle wore on, the contrast between the well commanded and disciplined British troops and the brave but ill led troops of Raza Sahib became evident. But an equally decisive factor was the French refusal to participate in the storming of the fort, as the commander M. Goupil did not approve of the decision. As waves upon wave of troops were mowed down by the defender’s firing, it came down to who would blink first.

After an hour of indecisive fighting, Raza Sahib finally blinked, asking for a temporary ceasefire to carry of the bodies of the dead, which was granted. The ceasefire over, the pounding began again, which went on all night, but unaccompanied by charging troops. With no immediate physical threat, Clive and his troops held fort, waiting for the next round of attacks the following morning in the desperate hope that the Marathas were not too far away.

Victory!

But the expected offensive never came the following morning. As the first rays of light broke out on 15th November 1751, Clive and his troops discovered that the enemy had retreated. The previous night’s bombardment had only been a covering fire to divert attention from their flight.

Against all odds, Robert Clive and his troops had successfully held Arcot against an opponent that outnumbered them nearly 500 to 1. For the first ever time, the forces of the British East India company had defeated those of a local prince. Victory had been achieved against impossible odds.

A precedent had been set.

Siege of Arcot (23rd September to 14th November 1751)

Aftermath

With help from its Maratha allies, the company army won decisive victories in battles against the French at Arani and Kanchipuram, effectively ensuring that the French would never become the masters of Southern India

The final British triumph was followed by the murder of Chanda Sahib

The losses to the British in 1752-53 marked the beginning of the end of French hegemony in the South. The East India Company would deal the coup de grace with a crushing victory in the Battle of Wandiwash (in present day Vandivasai) in 1761

Mohammed Ali, firmly established as the nawab of Carnatic, would reign until his death in 1795

Clive returned to England in February 1753, desiring to enter parliament. Political machinations, which blocked his passage to parliament, impelled him to return to India in July 1755.

Dupleix died a penniless and forgotten man in November 1763

Legacy

The defence of Arcot marks one of the most remarkable chapters in the military history of the British Raj in India. In the words of a later day biographer of Clive

There were to be few greater expeditions in the history of British arms… their feat was was achieved against staggering odds. It was an example of staggering boldness, resolution and, above all, endurance…

The hitherto politically inactive British increasingly came to realise the dangers posed by political vagaries in India and the consequent need to get involved in local politics if only to protect their trade.

The victories of small but professionally led armies against vastly stronger opponents brought home to the British the significance of having a professional army

The triumph of British forces despite overwhelming odds established an aura of invincibility around the British, leading local rulers to appreciate the value of having them as allies against would be enemies

The lessons from the earlier reverses against the French prompted the East India Company to introduce sepoy levies, which paved the way for the creation of a well trained, professional army

The reinstatement of Mohammed Ali marked the first instance of a local ruler being installed by the East India Company. The political arrangement, which arose purely due to circumstances, served as the model on which many subsequent British conquests in India were based

Robert Clive, hitherto a little known young writer with the East India Company, would lead the company army to far greater victories, laying the foundation for the British empire

The French never regained their losses and consequently lost out on the race to carve out an empire in India

The battle of Plassey in 1757 is generally- albeit wrongly- regarded as a watershed moment which heralded the beginning of British hegemony in India. The events at Plassey might have never come to pass but for the machinations in the southern end of the country a few years before that historic battle.

We shall now recount the events in the south that set the stage for British hegemony in India. Due to sheer length I have divided this article into two parts. In today’s article we shall see the circumstances under which British intervention in Indian affairs started and in part two we shall recount the final triumph of British arms which set the stage for the foundation of the British Raj. For convenience I have used the present day names for all places (with the exception of Madras/ Chennai).

Southern India in the 1740s

As we saw in the previous article, the Persian invasion in 1739 left the Mughal emperor in Delhi a mere figurehead, strengthening regional Satraps who consequently became absolute rulers even though they nominally owed suzerainty to the Sultan in Delhi. One among them was Mir Qamaruddin Khan, who had been nominated Nizam-ul-Mulk by the sovereign in Delhi, leaving him in charge of the region known as the deccan (a corruption of दक्षिण- dakshin, the Hindi word for south). With his capital in Hyderabad, the Nizam presided over a vast territory which included several parts of present day Maharashtra and most of southern India.

Map of the Carnatic Region

The dominions of the nizam included part of a region known as the Carnatic (the rest of which was controlled by the Marathas). The Carnatic was ruled by a subordinate ruler based in Arcot, popularly referred to as the Nawab of Carnatic. In 1732, the nawab passed away, bequeathing the throne to his nephew Dost Ali. The decision to bequeath the crown did not have the approval of the Nizam in Hyderabad who, for the moment, decided to wait it out.

Dost Ali gave him the opportunity some years later, when he went on an expansion spree, unilaterally annexing Tiruchirapalli and Madurai (both in present day Tamil Nadu). But ambition got the better of him, when he decided to annexe Tanjavur- an area which was under the control of the Marathas. The powerful Marathas, whose cavalry was rated among the best in the world in that epoch, routed the nawab’s army and not only recaptured Tanjavur, but even annexed neighbouring Tiruchirapally.

The Nizam Intervenes

Dost Ali was killed in the battle against the Marathas, leaving a vacuum of power at the top. There followed a series of upheavals until the Nizam of Hyderabad finally intervened and installed his own officer Anwaruddin Khan at the throne.

Mir Qamruddin Khan

The new nawab found himself boxed from all sides from the very outset. The throne having changed hands more than once in the preceding years, there were rival claimants to his seat out to overthrow him. Compounding matters was the fact that he derived his authority from an ageing Nizam who was already in his 70s then.

At this stage, the situation got further compounded by the foreign element.

European Machinations

Britain and France, bitter rivals with an enmity going back several centuries, had trading companies with settlements in the Carnatic at the time. The Europeans in India at the time were only present as traders, studiously avoiding getting themselves involved in local politics and the complications that came with it. But things started changing in the late 1730s, under the watch of the French Governor-General Benoit Dumas, who started the practice of getting involved in local affairs to maximise pecuniary and territorial gains. His successor Joseph François Dupleix took the policy further.

Anwaruddin

The outbreak of hostilities in Europe signaled a potential beginning of troubles in India, notwithstanding that the East India Company and its French counterpart were primarily trading outfits. Anwaruddin cautioned the British and the French alike, against any military action in his territory. At the time the French had by far the stronger army. Once it became evident that the French had no intention of holding back, Anwaruddin extracted an assurance from M. Dupleix that in the event of a French takeover of Madras (at the time a small British settlement), the territory would be restored to him.

The French laid siege to Madras on 10th September 1746, where the British were routed. And so the French were the absolute masters of Madras. It soon became evident to all concerned that M. Dupleix, who had halfheartedly agreed to restore Madras to the nawab, had absolutely no intention of fulfilling his commitment. The incensed Anwaruddin dispatched a 10,000 strong army under the command of his eldest son Mahfuz Khan to recapture Madras. Up against a small force of 230 French and 700 native soldiers, the nawab’s army outnumbered its rivals by over ten to one.

A Shocking Rout

What they lacked in terms of numbers, the French forces more than compensated in professionalism. In terms of discipline and battle tactics the French forces were far ahead of their numerically superior rivals. The two armies clashed at the banks of the river Adayar near a village called Mylapore on 24th September 1746. Contrary to all expectations, the nawab’s army was utterly routed.

Francois Joseph Dupleix

The French were now absolute masters not only of Madras, but also the villages near the settlement. But the situation did not last long. The treaty of Aix-la-Chapelle between Britain and France resulted in the return of Madras to British hands and brought an unexpected end to the conflict. An uneasy peace prevailed between the European rivals. All it needed was a fresh spark.

At a time when central authority at Delhi was weakening, the spark was not going to be too long coming.

A Disputed Succession

On 1st June 1748, the Nizam of Hyderabad passed away, nominating his son Nazir Jang to be his successor to the throne. The succession had the blessings of Mughal sultan Ahmad Shah (who had himself acceded to the throne just a few weeks prior to that). Normally that should have been enough to keep any aspirants to the crown at bay, but by 1748 the Sultan’s writ counted for little in the distant south. Muzaffar Jung, then governor of Bijapur and grandson of the lately deceased nizam coveted the throne .

Muzaffar did not have the means to take on his uncle by himself and so he called upon the powers that be in Satara (headquarters of the Maratha empire) to enlist their support in pressing his claim to succession. The Marathas decided that they had no interest in the conflict down south, at least for the time being.

Nonetheless, the Marathas released Chanda Sahib, who was in their captivity, and supplied troops to Muzaffar. Chanda Sahib was the nephew of Sa’adatullah Khan, the nawab of Carnatic who had passed away in 1732. Having been one of the erstwhile nawab’s closest confidants, he too believed that he had a strong claim to the throne that had been handed over to Anwaruddin by the Nizam of Hyderabad. In Muzaffar, he saw the person who could not only restore what he believed was his due, but also solve the problem of legitimacy.

Mughal Sultan Ahmad Shah

A deal was stuck between Muzaffar and Chanda Sahib to the effect that in the event of success, the former would be crowned the Nizam-ul-Mulk and the later the Nawab of Carnatic.

A Fresh Complication

Having dealt extensively with the French in the past, Chanda Sahib was well acquainted with Dupleix. Moreover, the thrashing that the French had dealt to Anwaruddin’s far bigger army not so long ago was fresh in memory. Not surprisingly, the would-be nawab approached the French to enlist their support against Anwaruddin as well as the nizam in Hyderabad. The opportunities presented by the proposal were not lost on M. Dupleix, who threw in his lot with the conspirators.

The combined armies of Muzaffar, Chanda Sahib and the French took on the troops of Anwaruddin at Ambur on 3rd August 1749. The outcome was an unmitigated disaster for Anwaruddin, who was killed in battle. His eldest son Mahfuz Khan was taken captive.

Marching to Arcot, Muzaffar Jung proclaimed himself the nizam and Chanda Sahib the nawab. Dupleix, whose ambition was also tempered by a clear political vision, pressed on the victors the need to eliminate the last possible claimant to the throne at Arcot, Mohammed Ali, the second son of Anwaruddin, who had manage to escape from Ambur and taken refuge with the British garrison at Tiruchirapalli.

Mohammed Ali

Dupleix successfully prevailed on his allies. And so the armies led by the triumvirate of Muzaffar, Chanda Sahib and the French now marched on Tiruchirapalli.

The Return of Clive

With the East India Company’s garrison under siege, facing a vastly superior enemy at Tiruchirapalli, Robert Clive (recently promoted to the rank of Captain) was instructed to take stock of the situation. Arriving in early August, he found that the troops there were demoralised. British ally Mohammed Ali’s coffers were empty. The soldiers were exhausted physically and mentally. They had little confidence of winning and still less confidence in their British officers (the troops, predominantly Indians, were mercenaries in the fashion of the time. The era of professional armies was still some way away). Captain Gingens, the man in charge at Tiruchirapalli was a cautious man and the situation demanded a more innovative, even audacious approach.

And audacious indeed was the plan that suggested itself to Mohammed Ali. With little hope of turning the tide there, he reasoned that it made imminent sense to attack Arcot instead. Seizing the opponent’s capital could have a severe psychological impact. Besides, with nearly all his troops concentrated in Tiruchirpalli, Chanda Sahib had left his capital dangerously vulnerable. Quick to see merit in the plan, Clive instantly approved it.

The stage was set for a second conflict between the forces of the British and French companies. The fate of southern India hung in the balance.